Remarks of Governor Peter Shumlin

January 21, 2016

Mr. President, Mr. President Pro Tem, Mr. Speaker, Mr. Chief Justice, members of the General
Assembly, distinguished guests, and fellow Vermonters, thank you so much.
My top priority as your Governor has been to make the lives of Vermonters more secure. Our
state budget is the roadmap for how we get there.
In my first budget speech, coming on the heels of three consecutive budget shortfalls, I pledged
to match our spending with Vermonters ability to pay, and I said lets keep with the long
tradition of frugality and common sense that is the lifeblood of Vermonters.
We have done that. This will be my sixth budget that does not increase income, sales, or rooms
and meals tax rates that are already too high.
Today, I am proud to present to you a budget that:

Closes a 68-million-dollar budget gap.

Does not rely on one-time money for on-going state expenses for the first time since the
Great Recession;
Increases General Fund spending by a modest 3.1 percent, which is matched by an
identical projected increase in revenues.
Protects our most vulnerable Vermonters and helps working families get ahead;
And helps fund the health care expansion that has given coverage to nearly 20,000
Vermonters who were living in fear that they were one sickness away from bankruptcy
just a few years ago.
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While it is easy to criticize a budget, and I know many will, its difficult to make the tough
choices involved in crafting a responsible one.
Lets remember where we started. Five years ago, our state was staggering from the blows of the
Great Recession, revenues were in free-fall, and there were no easy choices. Vermonts General
Fund revenues had fallen by nearly 15 percent, and we were faced with a 176-million-dollar
budget gap.
We didnt take the easy way out. We proposed 83 million dollars in General Fund budget
reductions and discontinued the prior Administrations phantom savings of 23 million dollars
from the failed Challenges for Change program that had been booked but never realized.
Despite what you may hear from those who practice revisionist history, five years later our fiscal
responsibility has paid off. The states revenues have grown every year, employers continue to
add jobs, our unemployment rate remains low, and personal income growth outpaces the national
average. Weve done all this while:

Fully funding pension payments;

Refusing to raid our rainy day funds;
Meeting our debt service;

And honoring our statutory obligation to the Education Fund because Vermonters cant
shoulder additional property tax increases.
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The single biggest challenge to affordability for Vermonters and our job creators is the
unsustainable rising cost of health care. Its also the single biggest challenge we have to maintaining
a sustainable state budget. In fact, this year alone, expanded health costs are driving nearly 75
percent of our budget gap.
The math is simple Vermont embraced Obamacare and signed up nearly 20,000 Vermonters for
health care, helping us to achieve near universal coverage long a goal of mine and many of you.
Today, over 200,000 of our residents are on some form of Medicaid. But while were eager to
expand Medicaid to families that had been making horrid choices without it, we have refused to
summon the courage to pay for it.
Last year I stood here before you as a Governor who has an aversion to taxes, and proposed a
modest payroll tax to pay for the promises we have made. Had that proposal become law, this
years budget discussion would be very different. The 55-million-dollar shortfall we face in
Medicaid would be virtually non-existent. We would have collected 100 million dollars in federal
money, which were currently leaving in Washington, that could have been used to adequately
compensate our health care providers who are being driven out of business by a system that pays
them just 40 to 60 cents on the dollar.
If you dont believe me, talk to the folks in Franklin County who just lost four family docs because
of inadequate and unfair reimbursement rates. Vermont should not be the state that signs people up
for Medicaid just to turn our backs on them. Vermont should not be the state who begs our doctors
and nurses to take care of folks on Medicaid just to turn their backs on them. Thats not leadership
and its not good government.
In order to help plug this years Medicaid budget hole, I am proposing that the provider assessment
now applied to hospitals and nursing homes be expanded to physicians and dentists, at half of the
rate that other providers are currently paying. This will raise 17 million dollars in state funds and
draw down 20 million of the federal dollars that weve been leaving on the table.
These funds will be used to increase Medicaid primary care and dental reimbursements for
providers and hardworking family docs who are currently struggling. Specifically, we will restore
the ill-conceived cuts made by the Affordable Care Act, which make it more difficult for our small,
rural providers to treat those on Medicaid.
Rising health care costs dont just threaten our state budget; they continue to create challenges for
Vermont families and businesses. In the last ten years, health care costs have doubled. Without
systematic change, premiums could nearly double in the next decade. If youre worried about
affordability, and as Governor Ive been worried about affordability every single day, then rising
health care costs are public enemy number one.
That is why since Day One of my Administration we have been working to change the way we pay
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for healthcare by moving from a fee for service payment method to an outcomes-based approach, or
what is known as the All-Payer Model. Thats a convoluted term for a strategy to achieve two
simple, common sense goals that go hand-in-hand: Enhanced care that leads to better health
outcomes for Vermonters and smarter spending by hospitals and providers that is focused more on
making people healthy and less on running tests and procedures to get paid.
Let me be clear about what the All Payer Model will mean for Vermonters:

You will get to choose your provider and see the doctor whom you trust.
Your doctor will get paid to keep you healthy, meaning they will get to spend the time they
need with you and you will have a relationship that is more than a yearly 15-minute
physical.
And for those on Medicare, your benefits will not change.

The All Payer Model is about restoring the relationship between Vermonters and their family doctor
or health care provider. It is no small irony that our future in health care is about restoring this
decades old relationship that has been eroded under our current money-gobbling, fee-for-service,
managed care system.
We have been working hand-in-hand with the Green Mountain Care Board to negotiate the terms of
Vermonts All Payer Model with the federal government. Next week, we will detail for you what
specifically we are asking of the federal government. It is my hope that we can come to terms with
them quickly, and begin the transition to a new, better health care system that will save money and
make Vermonters healthier. The Chair of the Green Mountain Care Board Al Gobeille is here
today. Thank you Al for all your hard work.
Some will claim that we should stick with the system we have because change is scary. We cant.
Under the fee-for-service system we have now we spend more on health care than anyone else in
the world, and our outcomes are not as good we have higher infant mortality, higher obesity, and
we dont live as long as the countries that are spending less than us. We must do better.
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When I ran for this office, I said we must spend our tax dollars to educate Vermonters, not lock
them up. Weve done that. By getting non-violent addicts into treatment rather than jail, we have
reduced Vermonts incarcerated population to the lowest level since the early 2000s. That has
saved us nearly 50 million dollars, money we are now using to ensure universal pre-k for three
and four-year-olds, school meals for all who need them, and dual enrollment and early college,
which is giving more Vermont kids a free start on a higher education.
Today those efforts continue. My budget recommends that we close the work camp at the St.
Johnsbury Correctional Facility because of our falling inmate population. Instead, lets use those
savings to fund my Step Up program, which will help those in low-wage jobs get back on the
academic track and the road to a brighter future. Lets use our tax dollars to educate, not
incarcerate.
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File this under something no one seems to know: Vermont currently charges the lowest mutual
fund registration fee in New England. I am proposing we raise that fee to match the other New
England states, which will raise over 13 million dollars, and use some of the additional revenue to
fund a $250 college savings account for every child born in Vermont and a $500 savings account
for low-income kids. Research shows that a college savings account can increase by three to four
times the likelihood that low and moderate income kids will attend college. My proposed fee
increase is modest its half of what Massachusetts currently charges but the impact on
Vermont kids will be great. Lets get this done.
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My Administration has set a goal to end family homelessness by 2020, not only because we know
it is the right thing to do but because we know that safe and stable homes serve as a platform for
economic opportunity and community revitalization. That goal is achievable, but only if we
commit ourselves to making it happen. That is why I am directing my Administration to develop a
plan to ensure that 15 percent of taxpayer-funded housing in Vermont is dedicated to homeless
families and those with special needs. My Agency of Human Services and Agency Commerce
and Community Development will work with the Vermont Housing Conservation Board, our nonprofit housing developers, service providers, my Poverty Council, and others to develop a
pathway to make this happen. Working together, we can end family homelessness by 2020.
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When Vermont took on the opiate and heroin crisis two years ago, we expanded the use of the
overdose reversing drug naloxone because we refused to avert our eyes to neighbors dying in our
streets from addiction. That single act has saved hundreds of lives. We will not turn back now.
My budget includes funding to make permanent the naloxone pilot program that we launched two
years ago, keep needle exchange programs operating across the state, and open a new treatment
hub in northwestern Vermont that will treat an additional 400 Vermonters.
My budget will also provide resources for those on the front lines of the opiate and heroin battle,
including 5 million dollars to fund positions for the Department of Children and Families, the
judiciary, the States Attorneys, and the Defender General, as well as 2 million dollars to improve
safety for state employees doing this important and difficult work.
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It is time for our state to open our eyes to another disease that is too often kept as a family secret
and spoken about in the same hushed whispers that I used to hear from victims of opiate
addiction. Suicide is the second leading cause of death for Vermonters ages 15 to 34, and the third
leading cause of death for those 35 to 44. We learned recently of the tragic loss of a Vermonter
and my neighbor, Betsey Catlin of East Montpelier, when her family took the courageous step of
publicly acknowledging her suicide. Betseys obituary said that after a long struggle with
depression, she ultimately decided she did not fit in this world. Her dad Mark said that while
Betsey tried to get by, she couldnt get by. My heart goes out to the Catlin family and all the
families across Vermont who have been impacted by suicide.
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Thats why my budget will almost double funding to the Vermont Suicide Prevention Center to
ensure help is available for Vermonters who struggle to get by.
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The budget I present today closes the General Fund budget gap of 68-million-dollars by trimming
the projected growth rate by 38 million dollars and raising 30 million dollars from the mutual
fund fee and expansion of the existing provider assessment. But we all know a budget is about
more than an accounting of numbers or a collection of line-items. It is a document that puts into
action our values, priorities, and hopes for a Vermont that is more secure for all who call this state
home. Creating jobs and an economy that works for every Vermonter. Ensuring everyone has
access to an education that will set them up to make a good living. Pursuing a rational criminal
justice system. Improving a health care system that delivers on the promise of universal access at
an affordable cost. Confronting addiction that threatens Vermonts quality of life.
The budget I present to you turns these values into action. I ask for your support. Thank you so
much.